Over the past months I have laid out for you the essential elements of financial success, or certainly the primary moves that vastly contribute to financial ‘less-stress’. In this month’s letter I offer up the last item in the Top 7 steps, which in my opinion is also the ultimate step. People would enhance their probability of being financially successful into the 90% plus range if they would do a financial plan; a written, time-specific, dollar-quantified, goal-oriented comprehensive financial plan.
I am a numbers person, a geek, maybe even a nerd – but I’m your financial nerd. It is my true blessing to have an easy relationship with numbers, math, models, taxes, finance, financial products, psychology, probabilities, government regs, accounting and the various accounts that they relate to, and the who and how steps to implement them. For these esoteric sounding items I can answer almost all questions related to them off-the-cuff. Nonetheless, there is one vitally important question that I know cannot be answered off-the-cuff. It is as follows; “If I want to do this (some goal, some target), what exactly do I need to do to get there without screwing up other things in my life?”
By definition, specifying ‘exactly’ doesn’t give room for making financial mistakes or arriving at the answer sub-optimally. It requires deep insight, cohesive analysis and wisdom. The unfortunate truth is that most Americans lack such financial insight, much less wisdom. Regarding gaining such knowledge, here’s what Confucious had to say:
By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.
And therein is the essential conundrum with money. As the old German adage would put it – ‘we get old too fast and smart too late’.
Everyone that I talk to says that they want to be financially successful, or at least not stress about money. In my opinion, the vast majority of people are not narcissistically driven but simply and rationally seek to do the right things now and not regret them later. Beyond the goals and aspiration, on top of the investment types and taxes, we have the essential metric of monetary balance; “How do I achieve what I have laid down as really important for myself and my family, and STILL live well now AND live well later?” Making this critical decision with wisdom also involves determining what trade-offs are involved? For example;
- If I spend this much money buying a really nice automobile every 5 years, how much less do I have to spend every month in retirement?
- If I quit working at 61 years of age and don’t want my lifestyle to decease, how much additional money do I need to save this year?
- Would I be better off financially to keep or pay off my mortgage when I quit working?
- Exactly how do I invest without being either too cautious or too risky?
- What’s the smartest thing that I can do to reduce my taxes?
- Etc. etc.
I estimate that there are 130 different financial questions that have to be answered to make the right choices for each household, conscious choices that have unique answers for every single one of the 122 million households in America. Done correctly, these decisions don’t leave any money on the table and you live life to the fullest extent you can. People need to bear in mind that if they are not thoughtfully deciding, they are still deciding by default (no decision is still a decision). If you find yourself monetarily rolling along without firm direction (or frankly, personal motivation), you won’t maximize your outcome and too many people *(way too many) end up short *(of money, or living life as good as they deserve). As said by the Cheshire Cat in Lewis Carroll’s “Alice In Wonderland”:
“If you don’t know where you are going, any road will get you there”
I have often spoken of the power of capitalism in these letters. Every single one of those successful business entities had a plan that made them successful. In my opinion the households of America are more important than any public company and households make the same decisions (priorities, resource allocation, personnel management, project financing, etc.). The powerful nature of comprehensive financial plans is what elevates them to the pinnacle of needed steps to money success.
So that I am always honest with you, I formerly thought the numero uno was investments (3rd in importance, yet I still want the best) and then I grew to appreciate that controlling our fears, emotions and discipline (investor behavior) is 2nd in importance. It is only through the hard experience of working with thousands of people that have I come to realize getting a comprehensive financial plan is the greatest act of achieving wisdom that a household can do. If we truly cared about our citizens and making the United States more prosperous, we would do one for them. Across America these plans cost $2,000 -$7,500 each. But because I grew up poor, and believe in them as so beneficial, Wellspring will have an expert create and deliver a written, comprehensive, detailed instructive, financial plan worth its salt for any household for the unbelievable low price of $320. For our clients, whom we love and value, they get these plans free. That’s paying it forward just the way it should be.
It remains my deep and distinct honor to serve you well.
Patrick Zumbusch
Founder and CEO
